Arresting developments

We wait ages for a case dealing with conveyancing procedures and then two come along at once. Two cases where, after exchange of contracts, the buyers discovered information about development near the property which they thought their sellers should have mentioned in replies – with two different results. Although both cases deal with residential property, there are many points relevant to commercial property lawyers.

Thorp v Abbotts

In Thorp v Abbotts [2015] EWHC 2142 (Ch), the sellers had received leaflets from the local authority and residents’ groups about proposals to earmark three sites for residential development as part of a core housing strategy. The sellers went to a meeting about the plan and talked to a ‘leading light’ of a residents’ group opposing all the developments.

The Abbotts formed the view that the local authority did not support development on the site nearest their home. When they came to sell their home a year later they replied to pre-contract enquiries on the 2007 version of the Seller’s Property Information Form (SPIF). This asked, among other things: ‘Has the seller either sent or received any communication or notices which in any way affect the property (for example, from or to neighbours, the council or a government department)? If yes, please supply a copy. Has the seller had any negotiations or discussions with any neighbour or any local or other authority affecting the property in any way? If yes, please give details.’

The Abbotts answered ‘no’ to both questions.

After completion, planning permission was granted on appeal for more than 800 homes on the site nearest the Abbotts’ former home. Were they liable to their buyer for fraudulently misrepresenting the position on the SPIF?

The court held that the Abbotts had given reasonable replies to the questions they were asked. They could not have predicted that planning permission would be granted on appeal. The consultation about the local plan and the residents’ association materials were not caught by the enquiry about ‘communication or notices’.

Orientfield Holdings Ltd v Bird & Bird LLP

Orientfield Holdings Ltd v Bird & Bird LLP [2015] EWHC 1963 (Ch) arose from a similar situation. Orientfield discovered after exchange that a school near the property would become an academy and special educational needs school for 1,400 pupils. The questions were not quite the same as those answered by Mr and Mrs Abbott.

First: ‘Have any notices or correspondence been received or sent e.g. from or to a neighbour council or government department, or any negotiations or discussions taken place which affect the property or property nearby? If yes, please give details.’ The seller replied ‘no’.

Then: ‘Is the seller aware of any proposals to develop property or land nearby or of any proposals to make alterations to buildings nearby? If yes, please give details.’ The reply was: ‘Please make your own enquiries.’

Bird & Bird, acting for the buyer, felt that this latter answer was not quite enough – the question concerned the seller’s knowledge. Its probing elicited the reply: ‘The planning question is too wide, which is why we advised to carry out a Plansearch which will reveal all the planning applications in the area. There are several ongoing developments on Avenue Road which are obvious on inspection. Our clients are not aware of any proposals to develop the immediate neighbouring homes…’ (emphasis added).

With the benefit of hindsight, this was a reply drafted with exquisite care. The seller was not aware of proposals to develop homes. The seller was aware of proposals to develop the school. Orientfield discovered material showing that the seller had retained Knight Frank to make representations to the local authority about the school, and that the seller had been a member of a residents’ group which instructed planning consultants about the school. The sellers could have argued that the school site was not ‘nearby’ their property – but why then had they been so involved in objecting to it? Orientfield rescinded the contract and sought the return of their deposit.

Orientfield’s case against its seller settled before trial with repayment of part of the deposit. The answer to the first question quoted above was clearly wrong. Orientfield then sued Bird & Bird for the balance of the deposit and other costs, alleging breach of duty. Judge Pelling said: ‘In general a solicitor is not obliged to undertake investigations that are not expressly or impliedly requested by the client.’ He did not think that Bird & Bird could be criticised if it had not carried out the Plansearch which the seller’s solicitors had suggested. But the search had been carried out and this was held to create a duty for Bird & Bird to explain it to its client. Instead the report on title said that the information provided did not reveal anything that adversely affects the property – the Plansearch was not mentioned at all in the report. By carrying out the search, Bird & Bird created a duty on itself to consider and report it.

A solicitor’s duty is to communicate material that may be material to a client, which Judge Pelling said was a threshold set at an intentionally low level. The client must judge the impact of the material that may be relevant, not the solicitor. It is immaterial whether the solicitor agrees with the client’s judgement. In the circumstances of the Orientfield purchase, the solicitor should have included a summary of the effect of the Plansearch report, the further investigations that could be undertaken at the local planning authority without undue difficulty, cost or delay, and to seek instructions. Bird & Bird has leave to appeal the judgment on the ground that the judge at first instance did not sufficiently consider how the Plansearch report should have been summarised – note not ‘whether’ but ‘how’.

Are these cases, both first instance, contradictory? In Thorp v Abbotts the judge preferred the sellers’ account of the facts. By contrast, Orientfield’s sellers seem not to have told the truth at all. Both cases are residential. It would be interesting to see whether a sale of a commercial property by professional property investors, such as a pension fund, would require a different standard of sophistication or knowledge about the planning process.

What should solicitors be doing in the light of these decisions? Pass on what you have learned about the property. Your client may not read it, but that must be their decision not yours. Be tenacious following up replies which have not been answered, or replies to a different question. If a stalemate is reached, ask your client whether the line of questioning should be pursued: it is their decision to make, not yours. London buses are said to arrive in threes: for conveyancing cases I feel that two is quite enough.

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